An Islamic index is a stock market index that includes only companies that meet Shariah compliance criteria. These indexes serve as benchmarks for Islamic investment funds and provide a curated universe of permissible investments for Muslim investors.
Major Islamic indexes include the Dow Jones Islamic Market Index (DJIMI), the S&P Shariah Index, the MSCI Islamic Index, and the FTSE Shariah Index. Each uses its own screening methodology to determine which companies qualify for inclusion. Despite methodological differences, they share the same core principles: excluding companies in prohibited industries and applying financial ratio thresholds.
Islamic indexes are used by fund managers to construct Shariah-compliant ETFs and mutual funds. They also serve as benchmarks against which Islamic investment portfolios are measured. The existence of multiple indexes with different methodologies means that a stock may be included in one index but excluded from another.